Do Forex Brokers Trade Against You?

Category: Broker Guides | Author: Trading Brokers | Date: January 2, 2023

One of the queries that new traders frequently post online is do forex brokers trade against you? Although it may seem implausible, some brokers actually trade against their own clients. Let’s examine what can happen to your trading if brokers trade against you and what information is available on this topic.

Two types of brokers

As previously indicated, brokers occasionally trade against their clients. While this is neither a secret nor a form of true dishonesty, many people may not even be aware of it.

It’s also important to remember that not all brokers operate in the same manner. In other words, the specifics of how they function vary from broker to broker, but the most fall into one of two categories: A Book brokers and B Book brokers.

The contract is always made between you and the broker when trading CFDs and forex. The broker is therefore technically always trading against you. The difference is in how they themselves manage this risk.

1) A Book Brokers

In terms of A Book brokers, they are only technically trading against their clients. In other words, they do take the opposing side of the transaction, but they often approach the market in a risk-neutral manner. Their objective is to immediately offset the trade,

No one wants to trade against profitable traders, and clients who are treated in this manner are typically regarded as profitable clients.

2) B Book Brokers

When it comes to deciding the position of their own clients to offset, B Book brokers will be a little bit more selective. To put it another way, they might adopt a directional stance and intentionally trade against their customers.

Given that the majority of traders (75%) lose money, it is obvious that the statistics favor the brokers.

Choosing a trustworthy broker

You should bear in mind a few things regarding your choice of brokers, especially when it comes to how to find the proper one to work with, if you are new and don’t want to lose all of your money in a few months, at best.

As long as a broker gives you fair and accurate order execution, it doesn’t really matter whether they trade against the client or not. There are many things to keep an eye out for, but we’ll highlight a few of the more crucial ones here. Always remember to check them out because it very well could determine whether or not your trades are successful.

1) Is your broker duly authorized and governed?

Before even beginning your work with the broker, the first thing you should look into is their licensing and regulation. You must realize that there are numerous threats out there, particularly when it comes to money.

Everyone will try to take advantage of you, including con artists and other dealers who will try to outwit you. You must take care of yourself as a result, which entails making financial arrangements.

Utilizing a regulated brokerage firm that is subject to strict regulation is the best way to make sure that you and your money will stay safe and secure. In this way, you will have some assurance that neither you nor your broker will run afoul of the law and that everything your broker offers complies with the rules that are ultimately designed to safeguard you, the client.

2) Reputability

Again, there is never enough trust when dealing with money. Unfortunately, in order to be a trader, you must be able to trust others. This requires trusting that they will protect your money and that they will uphold their half of the contract, which is essentially to provide high-quality service.

Because of this, you should learn everything you can about your broker before working with them. This entails reading up on their privacy statement, terms of service, who they are, the types of individuals they employ, and — most crucially — the feedback from other customers.

Online, people have become rather frank, and there isn’t much they won’t say if they are dissatisfied with a service. You should make use of that and research other people’s experiences with and opinions of the broker. You can learn what to anticipate from these reviews as well as the advantages and disadvantages of the broker. Broker reviews will most importantly assist you in determining whether or not a broker is reliable.

3) Submit inquiries

People no longer frequently ask queries directly to the service, for example. For some reason, people prefer to avoid direct communication and potential conflict by gathering knowledge “from around” rather than going straight to the source.

This is the wrong way to go about things; just ask the broker everything you want to know immediately. When you ask a question, licensed brokers are required to respond with accurate and comprehensive information. They are required to abide by intricate rules governing transparency and ethical trading.

The dealing desk policy is the key piece of information you require. Make sure you work with a professional broker since brokers who operate illegally, such as those who lack a license or who are registered in offshore tax havens, could not be telling the truth.

Even though they might be reluctant to acknowledge it, they must tell you that they serve as counterparties to your own trades.

4) Inform yourself

You should gather as much knowledge as you can, not only about the broker but also about trading in general. This should go without saying. Knowing when to trade is one of the most crucial pieces of knowledge you should have.

Spreads frequently increase immediately before the market opens, which is important knowledge for novice traders. Find out why spreads expand and why they narrow, what factors may be at play, what to do in these circumstances, how to spot them early on, and similar information.

5) How does stop hunting work?

It doesn’t matter if you’ve heard of this expression or not; you need to be aware of it. Stop hunting is a well-known tactic that involves getting asset prices to where traders have set stop-loss orders and then pushing some market participants to give up their positions.

In other words, traders who have decided to exit their position if the asset’s price crosses a given level are ‘encouraged’ to do so. A technique that utilizes severe volatility can be advantageous for those who know how to use it if a lot of stop losses are triggered in a short period of time. This offers an opportunity for those who understand and prefer such an environment.

6) Recognize requoting

Forex traders frequently come across the term “requoting,” which can be confusing at first if they don’t already know what it means.

When a broker requotes you, it signifies that they are unable or unwilling to execute a trade for you at the price you entered. Although it doesn’t happen frequently, it is occasionally reported to occur. Fast-moving markets are where it most frequently occurs, typically when there is a major news that could cause a significant shift in the system.

The process basically involves preparing a currency pair at a specific price and placing your order on the trading site. However, by the time your broker receives the order, the market may already have moved, making it impossible for the broker to carry out your proposed pricing.

The requote notice then appears on your screen, alerting you to the fact that the opportunity has passed and giving you the option of accepting or rejecting the new price. It is not unexpected that most people refuse the offer because the price is often higher than what they were hoping for. Requotes are typically bad for you, the trader, and beneficial for the broker, who may try to use it to charge you extra; however, this isn’t always the case.

7) What causes slippage?

You will also ultimately come across the term “price slippage,” which might have an effect on your trading. You might also need to keep an eye on your broker in this situation.

The price may increase significantly all at once when liquidity is low, such as right before markets close. You will be executed at the next available price if you have a stop or limit order set for a price that it jumps past. For instance, if the price of the EUR/USD unexpectedly climbs 50 pips while your stop is set at 25 pips, you might end up losing twice as much as you expected.

This is typical behavior, and you should occasionally see slippage both in your favor and against you. In the past, some unscrupulous brokers usually took slippage away from the client but gave it when it was in the client’s favor. Regulated businesses that interact with their regulators risk serious consequences. Watch for slippage and consider questioning it if it consistently seems to support your position.


Finally, it’s crucial to keep in mind that brokers frequently trade against their clients, so you should be aware of this. More than that, if you want to be a good trader, you need to know a ton of stuff and never stop seeking out new knowledge.

You must constantly keep an open mind and search for any information that will give you the chance to make the best decision at any given time, regardless of whether the information is about your broker, the asset you are interested in, the market, or the current events that could effect the market.

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